Legal Framework for International Business

3. The importance of informal processes in WTO diplomacy

The importance of informal processes in the WTO derives at least partly from the GATT’s use of the so-called Principal Supplier Principle (PSP), which usually involved initial discussion between the principal supplier and consumer rather than an open discussion involving the entire membership. It is also a product of the equal representation that it allows its members, which means that several other processes are needed besides the plenary meetings to beat the consensus into shape. The importance of informal processes in trade diplomacy is recognized even on the WTO website. Some informal consultations, such as the Heads of Delegations meetings (HODs), can involve the entire membership. Others involve smaller groups, such as the so-called Green Room meetings that take place at the initiative of the director-general. The existence of these informal processes allows members to exercise the flexibility that is often key to brokering compromise in a difficult trade negotiation. But when informality and a lack of rules become effectively written into the very basis of an institution, two sets of problems emerge.

The first set of problems is a lack of transparency and predictability. For developing countries, which attach considerable value to the predictability that comes from belonging to a rules-based institution, informality generates some serious difficulties. Green Room meetings in the GATT, and the WTO, were until recently especially notorious for this: the old-style Green Room worked by invitation only, and even the list of invitees was treated as confidential. Particularly in the aftermath of the failed Seattle Ministerial Conference, the opaqueness of such consultations and their exclusionary effects came under severe criticism. For instance, before the Seattle talks were brought to a close, African trade ministers issued the following statement on 2 December 1999:

‘There is no transparency in the proceedings and African countries are being marginalized and generally excluded on issues of vital importance for our peoples and their future. We are particularly concerned over the stated intentions to produce a ministerial text at any cost including at the cost of procedures designed to secure participation and consensus.

We reject the approach that is being employed and we must point out that under the present circumstances, we will not be able to join the consensus required to meet the objectives of the Ministerial Conference.’

A group of Latin American and Caribbean countries issued a similar statement. In the face of such trenchant criticism, a conscious attempt has been made by all the parties concerned to improve the process. The schedules of small-group meetings and the list of invitees are now announced; members can self-select participation; at least some minutes are published; and the meetings are open-ended and directed only towards consensus-building rather than any decision-making. But several problems persist. Often developing countries find that they are not well-equipped to even identify their interests in some of the highly technical areas to claim their right to participation in a small-group meeting. They also find that that they are unable to exercise the threat to block in the final stages of decision-making if they have not attended the consensus-building small-group meetings. In addition to this, informality places considerable discretion in the hands of the chairpersons at all levels of the WTO hierarchy. These key individuals define the agenda and frequency of meetings as well as the lists of invitees, and can thereby exercise an important influence on negotiated outcomes. In the absence of rules about exactly what the chair can do and how he or she can do it, the role that certain chairpersons choose to play inevitably becomes a source of conflict.

Finally, the importance of informal processes means that the WTO retains what Rubens Ricupero, Secretary General of the United Nations Conference on Trade and development (UNCTAD), describes as the ‘almost English club atmosphere’ of the GATT. This inaccessible culture of the institution, along with language barriers, makes effective participation as especially daunting task for the smaller and newer members of the WTO. As a result, developing countries, in coalitions or individually, have put forth proposals for institutional reform that envisage a WTO whose functioning is tightly bound by a clearly specified set of formal rules and procedures.

The second set of problems resulting from the lack of specific rules to govern the WTO is that it makes the WTO especially prone to power-based improvisation. In the absence of generally agreed rules to deal with difficult situations, we have examples of several stopgap measures that are somewhat cobbled together to become a part of the customary practice of the WTO. Decisions arrived at on the basis of such contested rules are bound to lack legitimacy. Examples of problems deriving from such haphazard improvisation and ad hoc rule-making abound in the short history of the WTO.